The Resource Taxing corporate profits in a global economy

Taxing corporate profits in a global economy

Taxing corporate profits in a global economy
Taxing corporate profits in a global economy
Governments design their corporate profits taxes from a domestic perspective to mesh with the country's personal income tax system. The corporate tax is integrated with the personal tax system and operates as a withholding tax on account of personal income tax. Even when so designed the corporate tax is usually non-neutral in its effect, distorting the timing, form and amount of investment and how it is financed. Reform proposals have focused on the need to improve the neutral properties of the tax in a domestic context. Such reforms are, inevitably, proposed and considered at a national level. The modern driving force for corporate profit taxes, however, has been the operation of such taxes, including dividend taxes, internationally. The corporate tax of one country will not ordinarily integrate with the personal tax of another. The existence of several different corporate taxes is unavoidable non-neutral in effect and distorts commercial activity including the location of investment and the destination of profits. Furthermore, countries compete for economic activity by lowering their tax rates and adapting their systems to attract business or profits or both. This is especially true for highly mobile activities and property, such as intangibles. Without agreement between countries on a common system for taxing and sharing profits, corporate taxes are likely to evolve through a variety of ad hoc measures into a simple common form aimed at preservering for as long as possible source-based taxation of production within a country's territory. In the long run, without agreement, there is no principle that dictates the survival of corporate profits taxes in their current form
Citation source
In: British tax review. - London. - (2013),
Gammie, M
Geographic coverage
Language note
  • tax system
  • corporate income tax
  • tax reform
  • tax rate
Taxing corporate profits in a global economy
Taxing corporate profits in a global economy

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